US patent court deals setback to Allergan's Restasis strategy

A U.S. administrative court said it has the authority to decide the validity of patents Allergan Plc transferred to a Native American tribe, dealing a setback to a strategy the company adopted to protect one of its best-selling medicines from generic competition.

The Patent Trial and Appeal Board, a court run by the U.S. patent office, declined on Friday a request to dismiss litigation brought by the generic drug company Mylan NV challenging the validity of Allergan’s patents on its dry eye medicine Restasis.

In September Allergan transferred its patents covering Restasis to the Saint Regis Mohawk Tribe, arguing that the New York-based tribe’s status as a sovereign entity meant the patents could not be reviewed by the board because of a legal doctrine called sovereign immunity.

“The PTAB’s ruling reinforces our belief that Allergan’s maneuvers to engage the St. Regis Mohawk Tribe for patent protection were a sham,” Mylan Chief Executive Heather Bresch said in a statement.

Allergan declined to comment.

In 2016 Mylan asked the patent board to invalidate the Restasis patents, saying they described obvious ideas.

Mylan also asked a federal judge in Texas to invalidate the patents.

The tribe agreed in September to take legal ownership of the patents and license them back to Allergan in exchange for ongoing payments.

After announcing the deal the tribe asked the patent board to dismiss the Mylan challenge, saying entities with sovereign immunity cannot face litigation without their consent.

Allergan has said the patent board is a flawed and unfair forum. The drug company said it would not object to the patents being reviewed in federal court.

U.S. lawmakers from both political parties have criticized Allergan’s maneuver, with one U.S. senator introducing a bill to ban attempts to take advantage of tribal sovereignty.

The patent board said in Friday’s ruling that tribal immunity does not apply to patent review proceedings.

The tribunal also said Allergan had retained an ownership interest in the challenged patents so the proceedings could continue without the tribe’s participation.

In October the federal judge in Texas invalidated the Restasis patents instead of waiting for the board to rule, rendering Allergan’s move largely meaningless.